A Guide for a Leasehold Property
This guide is intended to give an overview of the provisions that are contained in leases. It is not exhaustive and is merely intended to highlight some of the key elements of a leasehold property. Your solicitor will send you a detailed report once they are in receipt of the lease to the property.
What is a Lease?
A lease is a legal document that transfers land from one party (the Lessor/Landlord) to another (the Lessee/Tenant) for a set period of time e.g. 99 years (the term). The term of the lease will reduce each year. Your solicitor will advise you of the remaining lease term and will check that it is acceptable to both you and any mortgage lender.
What is included in a Lease?
The lease itself will define the property being purchased and usually this will include all internal finishes of the walls, ceilings and floors of the property, but will specifically exclude the structural parts of the building.
The lease will also detail the rights, responsibilities and restrictions on both the Tenant and the Landlord. The lease generally includes a great many do’s and don’ts (Covenants) and the provisions are very detailed, but also necessary.
What is Ground Rent?
Under the terms of the lease, ground rent is usually payable to the Landlord. The amount payable is set when the lease is completed and varies from case to case. Ground rent is generally fixed for a period of years and can be reviewed in accordance with the terms of the lease.
What is a Service Charge?
Usually, a lease requires you to pay a service charge to the Landlord or a Management Company who deals with the day to day maintenance of the building or development. The Management Company is also usually responsible for ensuring that the development is adequately insured.
The lease will specify the responsibilities of the Management Company and how the service charge is calculated and recovered. Generally, the Service Charge is a contribution towards the costs of maintenance and administration of the communal areas and the building including repairs, repainting, lighting and cleaning.
The Management Company will issue a service charge forecast at the start of each year, based on their predicted expenditure for the year. The Management Company is entitled to make adjustments, whether positive or negative, at the end of each year if total expenditure differs from that which was budgeted. Your solicitor will let you have full details of the service charge payable and details of any long term repairs that are likely to lead to an increase.
Please be aware however that the Service Charge is likely to change in the future as and when essential repair work becomes necessary. The Management Company is entitled to increase service charge contributions where significant expenditure on maintenance and repair is required (e.g. repairing or replacing a lift) and the reserve (or “sinking”) fund is not sufficient to offset the costs of such works.
Are any Additional Fees Payable?
Under the terms of the lease, you may be required to enter into a Deed of Covenant with the Management Company and/or Landlord upon completion. By entering into the Deed of Covenant the Management Company is able to enforce the covenants contained within the Lease directly against you. The Management Company is likely to charge an additional fee for providing the Deed and its subsequent registration. If the Management Company is required to provide a Land Registry consent, again additional fees are likely to be payable.
Finally, Notice fees are often also payable to the Landlord and/or Management Company. Your solicitor will send the notices upon completion and a fee is charged for amending the details held. Your solicitor will advise you of the fee payable, as soon as they become aware of it.
If you would like any further information, please contact any of the Timms Property team on freephone 0800 011 6666 or email email@example.com.